Quotes from Burton G. Malkiel

By buying a share in a "total market" index fund, you acquire an ownership share in all the major businesses in the economy. Index funds eliminate the anxiety and expense of trying to predict which individual stocks, bonds, or mutual funds will beat the market.

This simple investment strategy—indexing—has outperformed all but a handful of the thousands of equity and bond funds that are sold to the public. But you wouldn't know this when Wall Street throws everything but the kitchen sink at you to convince you otherwise. This is the plan we use ourselves for our retirement funds, and this is the plan we urge you to follow, too.

Trust in time rather than in timing.

You could talk about Prohibition, or Hemingway, or air conditioning, or music, or horses, but in the end you had to talk about the stock market, and that was when the conversation became serious.

Those with a broader view—investors who recognize that the world has changed considerably since Markowitz first enunciated his theory—can reap even greater protection because the movement of foreign economies is not always synchronous with that of the U.S. economy, especially those in emerging markets.

The best choice for your equity investments is a fund indexed to the total world stock market. If you are truly uncomfortable investing in "foreign" stocks, you could choose a domestic total stock market fund. We recommend that you be diversified internationally because the United States represents less than half of the world's economic activity and stock market capitalization. For your bonds, choose a total U.S. bond market index fund.

We have believed for many years that investors will be much better off bowing to the wisdom of the market and investing in low-cost, broad-based index funds, which simply buy and hold all the stocks in the market as a whole. As more and more evidence accumulates, we have become more convinced than ever of the effectiveness of index funds. Over 10-year periods, broad stock market index funds have regularly outperformed two-thirds or more of the actively managed mutual funds.

The average actively managed mutual fund charges about one percentage point of assets each year for managing the portfolio. It is the expenses charged by professional "active" managers that drag their return well below that of the market as a whole. Low-cost index funds charge only one-tenth as much for portfolio management. Index funds do not need to hire highly paid security analysts to travel around the world in a vain attempt to find "undervalued" securities. In

A firm's income statement may be likened to a bikini—what it reveals is interesting but what it conceals is vital.

As an investor, you have one powerful way to keep from getting distressed by devilish Mr. Market: Ignore him. Just buy and hold one of the broad-based index funds that

It is not hard to make money in the market.

Never buy anything from someone who is out of breath.

It is not hard to make money in the market. What is hard to avoid is the alluring temptation to throw your money away on short, get-rich-quick speculative binges. It is an obvious lesson, but one frequently ignored.

put time on your side. Start saving early and save regularly. Live modestly and don't touch the money that's been set aside.

I view investing as a method of purchasing assets to gain profit in the form of reasonably predictable income (dividends, interest, or rentals) and /or appreciation over the long term.

Predicting the stock market is really predicting how other investors will change estimates they are now making with all their best efforts. This means that, for a market forecaster to be right, the consensus of all others must be wrong and the forecaster must determine in which direction-up or down-the market will be moved by changes in the consensus of those same active investors.

The greatest of all gifts is the power to estimate things at their true worth.

Tip of the Week If you bought $1,000 worth of Nortel stock one year ago, it would now be worth $49. If you bought $1,000 worth of Budweiser (the beer, not the stock) one year ago, drank all the beer, and traded in the cans for the nickel deposit, you would have $79. My advice to you…start drinking heavily.

Two-thirds of professionally managed funds are regularly outperformed by a broad capitalization-weighted index fund with equivalent risk, and those that do appear to produce excess returns in one period are not likely to do so in the next. The record of professionals does not suggest that sufficient predictability exists in the stock market to produce exploitable arbitrage opportunities.

A firm's income statement may be, likened to a bikini-what it reveals is interesting but what it conceals is vital.

Look for growth situations with low price-earnings multiples. If the growth takes place, there's often a double bonus—both the earnings and the multiple rise, producing large gains. Beware of very high multiple stocks in which future growth is already discounted. If growth doesn't materialize, losses are doubly heavy—both the earnings and the multiples drop.

there are four factors that create irrational market behavior: overconfidence, biased judgments, herd mentality, and loss aversion.

In the 1990s, the ratio of buy to sell recommendations climbed to 100 to 1, particularly for brokerage firms with large investment banking businesses.

You will never be allowed to buy the really good IPOs at the initial offering price. The hot IPOs are snapped up by the big institutional investors or the very best wealthy clients of the underwriting firm.